Financial Incentives in the Austrian PAYG-Pension System: Micro-Estimation

The scope of this paper is to investigate the impact of financial incentives on the retirement decision of private sector workers in Austria. How do financial incentives embedded in the Austrian pension system impact individual retirement behavior? We are using a unique data set of individual social insurance spells. Micro-estimating the impact of financial incentives on the probability of retirement shows that the behavioral response to financial incentives in Austria is relatively large in international comparison. Also, there are striking behavioral differences between men and women. Using the estimates to simulate the response to reform shows that actual retirement ages could be most successfully brought up by a 6 percentage point deduction in pension benefits per year of early retirement.